Cryptocurrencies and stocks are similar in that they trade on exchange platforms. They are both subject to removal from these platforms. This removal of assets from exchanges is known as delisting. Delisting can either be a request from the parent companies or a ban for not following the listing rules of an exchange.
Delisting of stock and cryptos is always a lousy signal since the shares and coins may become valueless. However, before delisting, some factors and signs always precede. Such factors include:
- Regulatory uncertainties
- Non-adherence to listing requirements of an exchange
- Security risks
- Low trading volumes
What Happens During Delisting Of Assets?
Even though delisting sounds very harsh to investors, it is not always that their money gets lost. They may receive their cash in buybacks or liquidation processes of their companies. Also, most exchanges have a preset resale value of every asset, which assures the safety of these assets.
The delisting process is simple but very crucial. The first thing that happens is that a stock or crypto company receives a delisting notice from its exchange. If the warning has a deadline and does not resolve the compliance issues, the exchange delists them.
After delisting, the company now trades over the counter (OTC), meaning through a dealer network. The investors do not lose their money instantly; but instead, they start deserting these assets. This deserting leads to a collapse in the market value of the assets.
Is It Advisable To Hold Delisted Digital Assets?
After delisting, most assets usually lose value sharply due to massive sales and minimal purchases. The crypto whales and giant stock investors lose interest in these possessions and withdraw their money. As a result, the hard-earned money from other investors may lose value sharply. To avoid this sharp decline, an investor may sell back their holdings or wait for re-enlistment.
However, in the event of buybacks from the company, investors get a chance to set their resell prices. Additionally, the investors can only set these prices at a value higher than the preset floor prices. After the voting by the investors, the company announces its final delisting price. However, the final delisting price has to allow the acquirer to purchase at least all of the public’s shares. Since re-enlisting is also possible, it is up to the investor to decide whether to sell during a buyback.